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Finding REIT Investors through the EB-5 Visa Program

Real estate investment trusts looking for new investors should consider participating in an increasingly popular US immigration law program. Each year, the U.S. Citizenship and Immigration Service (USCIS) allocates 10,000 visas through the fifth category of the employment-based paths to permanent residency (EB5) to foreign-nationals who invest in the U.S. [1] Sometimes referred to as the “million dollar green card”, the EB5 has been wrought with frustration due to stringent standards and wary would-be applicants. In an attempt to make the program more attractive, the USCIS made key amendments and set aside 5,000 visas (of the 10,000 total) to foreign nationals investing in designated “Regional Centers”. [2]

There are generally three paths to the EB5. [3] First, a foreign-national may actively invest $1 million and hire ten employees anywhere in the United States. [4] Second, a foreign-national may actively invest $500,000 and hire ten employees in an area where the unemployment rate exceeds the national average by 150%. [5] Third, a foreign-national may invest as little as $500,000 in a USCIS designated Regional Center. [6] Regional Center investments may be passive and do not require day-to-day involvement by the foreign-national. [7] In addition, the foreign-national does not have to directly employ ten US workers, but need only demonstrate that ten US jobs will be indirectly created as a result of the investment. [8]

There are currently twenty qualifying regional centers throughout the United States, including several real estate investment trusts, a mining operation, a ski resort, and several municipal redevelopment programs. [9] To qualify as a Regional Center, an applicant must demonstrate that the program will focus on a geographic region, promote economic growth, increase domestic capital investment, be promoted and publicized to potential investors, have a positive impact on both the regional and the national economy, and generate a greater demand for business services, utilities maintenance and repair, and construction jobs. [10]

To obtain approval, the organization must apply by submitting a narrative to the USCIS Associate Director of Operations. [11] Applicants usually include analyses from economists and industry experts addressing each of the requirements. [12] If the Associate Director determines that the application does not meet all the requirements for designation, the USCIS will issue an Intent to Deny Letter. [13] The letter explains the application’s deficiencies and provides the applicant 30 days to respond with additional evidence to cure the application’s defects, before it can be denied. [14] If the USCIS determines that the application still does not establish eligibility, it will deny the application without prejudice. [15] Applicants may appeal the decision to the USCIS Administrative Appeals Office. [16]

One example of a successful Regional Center operation is the Gateway Freedom Fund, which invests in a rapidly gentrifying industrial district immediately south of downtown Seattle. [17] Gateway was founded in 1996. [18] Part of its appeal is that most investors participate for-profit only without any immigration benefits. [19] The organization serves as the general partner and is responsible for building renovations, leasing, and management. [20] The investors are limited partners and as a group, may remove the general partner for cause. The investors receive 70% and the fund collects 30% of all profits. [21]

Part of the appeal of the EB5 program is that the quota has never been reached; a rarity at a time when chronic shortages plague almost every other immigration visa category. For most other permanent residency visas, the backlog is several years long, especially for nationals of “high-immigration” nations such as China and India. The EB5 provides an alternative path for foreign-nationals wishing to immigrate to the US and an opportunity for US real estate trusts looking for additional investors.